'Shame on us'

"The thing that's really gratifying is that people are excited about the types of features that are possible, and it's sort of shame on us that we haven't done as good of a job as we can to make people feel like that's where we're headed," Whitten said.

If not for the outrage of fans, the Xbox One would have been required to "check in" online every 24 hours, and trading and selling Xbox One games would have been heavily restricted. But those restrictions also left wiggle room for Microsoft to explore new features like cloud computing and digital game sharing.

The cloud is still a pillar of the system, but Family Sharing will not be available when the console launches in November.

"While Xbox One is built to be digital native, to have this amazing online experience, we realized people wanted some choice," Whitten said. "We added to what the console can do by providing physical and offline modes in the console. It isn't about moving away from what that digital vision is for the platform. It's about adding that choice."

Microsoft had to remove a feature to make that happen, but that doesn't mean it won't return later on.

"If [digital game sharing] is something that people are really excited about and want, we're going to make sure that we find the right way to bring it back," he said, explaining: "We took some feedback and realized there was some stuff we needed to add to the program.

"To add it to the program, we had to make room, just from a pure engineering perspective, to be able to get that work done. So taking Family Sharing out of the launch window was not about 'we're going to take our toys and go home' or something like that."

Looking backward

Whitten said the Xbox 360's annual dashboard updates prove Microsoft's commitment to continually improving the console experience, and the same will hold true when it comes to the Xbox One.

He seemed excited about what Microsoft is doing with cloud computing and the Xbox Live experience on the new console, and said that he thinks Microsoft's press conferences before and during E3 actually went well. But he had one regret to share.

"One of the things I think we learned was that we didn't talk enough, and we were incomplete in a lot of how using the system would work," he said.

"Because we weren't participating in the conversation in a deep enough way, it got us sort of off cycle about how we talk about our program. I think we've learned a lot of lessons.

"And I think it's something that you're going to see a lot more from us, frankly, is engaging more with the community. I think it's the No. 1 thing I'd want to do if I went back, was have the conversation more open and more complete."